​ASIC seeks harsher penalties to ‘amplify the fear’

by 20 Feb 2014
ASIC has called for harsher penalties in the financial services sector to help remove ‘bad apples’ from the industry.

Speaking at the first public hearing of the Senate Inquiry into ASIC’s performance yesterday, ASIC chairman Greg Medcraft lamented the lack of strong penalties available to the regulator.

“It is frustrating – both for us and the public – when the penalty available to respond to misconduct is much less than the profit someone made in the process,” said Medcraft.

“If the thinking of law-breakers is a tussle between fear versus greed, then we need penalties that amplify the fear and smother the greed. We need penalties that create a fear that overcomes any desire to take risks and break the law.”

Medcraft pointed to the high number of public submissions made that related to problems in low doc and other mortgage lending prior to the GFC, and called on the Inquiry to strengthen ASIC’s licensing, investigation and enforcement powers.

ASIC requested the ability to ban a person from managing a financial services business, suggested a “streamlining” of search warrant powers and a review of the “consistency and availability” of penalties.

“There is an expectation among the public that we will take strong action against wrongdoers – and doing this will send a message that shapes future behaviour,” said Medcraft.

“However, one of the barriers we face to achieving this is the inadequacy of penalties.”

Medcraft highlighted inconsistent penalties for a number of comparable criminal offences, and claimed civil penalties were not only set too low, but also were not available for a sufficiently wide range of misconduct.

“Lastly, we require a more graduated set of penalties to provide an effective enforcement response in a wider range of cases.”

Medcraft also called on better regulation of the financial advice industry, including implementing a national exam for financial advisers and extending the public register to cover employee financial advisers, “which will help remove ‘bad apple’ advisers from the industry”.

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